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BrasilAgro posted a weaker nine-month result, with BRL 637 million in net revenue, BRL 42.8 million in adjusted EBITDA and a BRL 76 million net loss, as lower commodity margins, sugarcane volume pressure and higher financial expenses hurt performance.
The company highlighted a land sale in Paraguay as proof of portfolio liquidity, saying the deal generated an IRR of 23% in reais and 14% in dollars while also showing continued demand for assets in the region.
Management said hedging and cost control remain key supports, with about 65% of soy currency exposure locked, 76% of cotton sold and 54% of corn sold, while the company has already secured roughly 70% of its potassium chloride needs despite fertilizer price inflation.
Brasilagro Cia Brasileira De Propriedades Agricolas (NYSE:LND) reported a weaker first nine-month period as lower commodity margins, sugarcane volume pressure and higher financial expenses weighed on results, while management emphasized the company’s land liquidity, hedging position and efforts to control input costs.
Chief Executive Officer André Guillaumon opened the call by noting that BrasilAgro is marking its 20th anniversary. He said the company’s history reflected “a lot of resilience” and lessons learned, along with regional development tied to roads, electrical networks and employment. Turning to the current year, he described the operating environment as “really complex” because of interest rates and other external factors, but said management is focused on what it can control, including technology, planting decisions and productivity.
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For the first nine months, Guillaumon said BrasilAgro posted BRL 637 million in net revenue, BRL 42.8 million in adjusted EBITDA and a BRL 76 million net loss. Chief Financial Officer and Investor Relations Officer Gustavo Javier Lopez said the company had reported a positive result of BRL 76 million in the same period last year, while adjusted EBITDA in the prior-year period was BRL 195 million.
Guillaumon pointed to a land sale in Paraguay as evidence that BrasilAgro continues to find liquidity for its real estate portfolio, even in a challenging environment. He said the transaction was “not very big” but meaningful because it demonstrated demand for a project that had suffered from climate issues in recent years.
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According to Guillaumon, the Paraguay transaction produced an internal rate of return of 23% in Brazilian reais and 14% in U.S. dollars, which he said was within the company’s historical averages. He added that Paraguay is delivering positive production surprises this year and that management sees potential from both a productive and real estate perspective.
Management described a mixed commodity backdrop. Guillaumon said soy and corn prices have largely moved sideways since the start of the recent geopolitical conflict referenced during the call, while cotton has shown a more significant recovery. He attributed cotton’s move to its connection with synthetic fibers and oil byproducts.
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Guillaumon said cattle markets are in a positive cycle, citing restricted supply in Australia, the United States and Brazil. Ethanol, however, has not reacted as management expected in relation to gasoline prices. He said the company could see a recovery later in the second half if the conflict persists.
On sugar, Guillaumon said management is watching weather risks tied to El Niño and the potential impact on sugar production in India and Thailand. He said the company is not optimistic that prices will return to BRL 0.18, but believes the downside is more limited and that there could be upside for both gasoline and sugarcane-related pricing.
Guillaumon said the geopolitical conflict has so far affected BrasilAgro more through the cost side than the revenue side. He cited higher prices for phosphate fertilizers, potassium chloride and urea, particularly products linked to natural gas. Phosphate fertilizer prices moved from around $600 to nearly $800, according to his comments.
BrasilAgro has already bought about 70% of its potassium chloride needs, Guillaumon said, and has a stronger position for fertilizers needed in the first harvest. However, he noted that some inputs for off-season crops and sugarcane planting in the first half of next year have not yet been purchased.
In response to a question from Bruno Tomazetto of Itaú BBA, Guillaumon said the company is evaluating timing and application levels for sugarcane fertilization, especially given the relationship between fertilizer absorption and soil moisture. He said younger sugarcane may allow for more flexibility in splitting applications, while older sugarcane typically requires a fuller dose.
Guillaumon also said the appreciation of the Brazilian real has helped offset some cost increases, particularly for crop protection products. He said last year’s direct cost for soy was about BRL 4,100 per hectare and that the company currently sees costs as very similar year over year, despite fertilizer volatility.
BrasilAgro closed the period with a planted area of 168,000 acres, according to Guillaumon. He said soy was about 94% harvested, with most of the remaining harvest in Paraguay, where conditions have been favorable. The company has also started the summer corn harvest and began sugarcane harvesting in two units, including Serra Branca and Alto Taquari.
Guillaumon said the company is taking a cautious approach to the next planting season because of El Niño, particularly in the Northeast region, and is reviewing areas that historically create production issues.
On hedging, Guillaumon said BrasilAgro has locked in about 65% of its currency exposure for soy at approximately BRL 5.89 per U.S. dollar, with Chicago prices around $10.85. He said remaining volumes were being locked at about $12, which could support an average exchange rate near BRL 5.65 to BRL 5.70. For cotton, the company has about 60% sold at an exchange rate near BRL 6.65 per dollar, with about 76% of the commodity sold. Corn is about 54% sold.
Lopez said BrasilAgro ended the period with BRL 1 billion in net debt and BRL 887 million in cash. He said the company’s debt carries a cost of 93.2% of CDI. BrasilAgro also has BRL 768 million in farm receivables, including more than BRL 280 million related to soy.
Lopez said most costs have already been incurred and that the company will now focus on commercializing, transporting and collecting receivables tied to production. He also said management is seeking to reduce leverage, particularly as expectations for interest-rate reductions have shifted following recent developments.
Asked about the cancellation of a farm transaction, Guillaumon said the asset returned to BrasilAgro’s base and that the company will seek another way to do business with it. He said the buyer in that canceled transaction was more leveraged than other counterparties in BrasilAgro’s portfolio. More broadly, Guillaumon said the company remains confident in its receivables portfolio, noting that its transactions are structured so that BrasilAgro retains title until payment conditions are met.
Brasilagro Cia Brasileira De Propriedades Agrícolas is a Brazil-based agribusiness company focused on the acquisition, development and commercialization of agricultural land in key farming regions across the country. The company’s core activities include identifying undervalued or underutilized rural properties, implementing infrastructure improvements and modern farming practices, and either operating the land directly or selling it to third parties. Brasilagro’s land bank spans several states in Brazil, with holdings in Maranhão, Bahia, Tocantins, Goiás and Mato Grosso, among others.
In its agricultural operations, Brasilagro cultivates a variety of crops such as soybeans, corn and cotton, leveraging advances in crop genetics, irrigation and soil management to enhance productivity and sustainability.
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The article "Brasilagro Cia Brasileira De Propriedades Agricolas Q3 Earnings Call Highlights" was originally published by MarketBeat.
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